Don’t let deal-breaking sins kill your chance to raise money

Don’t let deal-breaking sins kill your chance to raise money

How to gaffe-proof your sales pitch

Most entrepreneurs are shocked when I tell them that almost all businesses can be financed. “If that’s true,” they ask, “then why do investors treat me as if I had the plague?” In the five years, I’ve been at the helm of the Regional Investment Bankers Association, I’ve watched nearly 1,500 companies attempt to raise money at our conferences. Sadly, most business owners short-circuit their efforts by committing four deadly sins. Refrain from making these easy-to-avoid blunders, and you’ll wind up with the equity capital that you deserve. ARROGANCE: Equity investors are like partners. And partners, or even would-be partners, want some respect. Don’t get so caught up in your presentation that you fail to listen to their suggestions, and never allow yourself to become defensive when they do voice their opinions. “If our money is in the company, then the chief executive has to be able to take criticism from me constructively,” an investment banker once told me. “If he or she is too arrogant to accept another point of view, then we’ll cut things off.” LAZINESS: If you attempt a deal and it falls through, shopping the same deal with the same prospectus won’t work, even if you back it up with additional documentation. Why? Because you are somebody else’s damaged goods, and the folks on Wall Street are in the sales business, not the repair business. Stalled negotiations are a clear sign that you need to rethink – and revise – your prospectus and pitch before you approach the next investor. BLANDNESS: At our conferences, there’s often a buzz about a hot new company that’s in registration. A half-hour later, the same firm has killed its chances of making a deal because the chief executive couldn’t sell his way out of a paper bag. The worst offenses: droning on about some arcane aspect of your technology; showing a bland corporate video that doesn’t speak to your investors; or, most pernicious, staging a live demonstration that flops. I still cringe when I think of one Internet start-up that was unable to connect to the Net while 150 investment bankers were looking on. To improve your pitch, learn to think the way equity investors do. They know that they will get a good return on the money they put into your business only if the company is acquired or goes public. The likelihood that either of these things will happen depends solely on how well the CEO can promote the company and its future. If you’re not sure that your presentation is sharp, hire a sales coach.

Posted by on December 4, 1999

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